The Graduate Moves On

These days no product embodies the ruthless, near-frictionless manufacturing machine of global capitalism more perfectly than the flat-panel TV. Sales are skyrocketing, dominated by consumer-electronics giants--Sharp, Samsung, Panasonic--that are busily plowing billions of dollars into R&D, new factories and marketing. Prices are plummeting as more and more players jump into the game, many of them unknown names out of Taiwan and mainland China. Now into this chaotic field drives Katsumi Iizuka, a Japanese entrepreneur who recently put 30,000 kilometers on his rented Opel, trying to flog flat-panel TVs put out by his new company, Byd:sign (pronounced "by design"), on a weeklong tour of Germany, France and Britain. Iizuka recalls his reception with a laugh: "I'd tell people I'm from a Japanese venture company, making flat-panel TVs, and they'd say, 'No new Japanese company has come here selling TVs in the past 15, 20 years. But the Chinese, Taiwanese, Koreans--they're showing up every month'."

Iizuka represents a new twist in manufacturing, and not only in Japan. In a world where high-tech gadgets are increasing-ly becoming high-volume commodities, a tech company has basically two strategic choices. It can invest heavily in innovative new products, or undercut the growing ranks of superlow-cost rivals on price. Iizuka belongs decidedly to the latter camp. Indeed, he is one of its most radical practitioners since Michael Dell, who revolutionized PC manufacturing by reducing his company to a thinly staffed corporate HQ, processing PC orders from customers directly to contract manufacturers. This is no coincidence: Iizuka once ran Dell's Asia-Pacific operations, and he's now trying to out-Dell his former employer by manufacturing more with even less. With a staff of just 19 people, Byd:sign sold 70,000 TVs last year, up from 4,000 in 2004, the year the company started.

Iizuka's basic strategy is a more extreme application of lessons learned from Dell: Figure out exactly what your customers want--then have others make it for you at the lowest possible price. Use the power of the Web as a direct-sales tool while holding inventories to the minimum. And, above all else, keep your operations leaner than lean. Iizuka's staffers, who work out of a nondescript office building in the markedly untrendy neighborhood of Tsukiji near Tokyo's famous fish market, handle industrial design and basic engineering, scooping up ideas from Japan's still-active TV-industry innovators. Then the company sends the specs to its assembly partners in China and Taiwan--including a rising giant named Xoceco, based in the mainland industrial city of Xiamen. Iizuka aims to keep his prices 35 to 40 percent below those of bigger competitors. This year he also aims to triple his 2005 sales ($50 million), while raising his profit margin from 3.5 to 5 percent (most Japanese TV makers are losing money).

Iizuka unapologetically extols the virtues of old-fashioned stinginess. Though he spends most of his time shuttling between China, Taiwan, Japan and the United States, he says he buys only last-minute air tickets through the Web and prefers to stay at budget hotels. Employees are exhorted to spend no more than $120 a night on lodging--not that he has many employees to worry about.

The finished products are shipped from China to buyers in the United States and, increasingly, Japan. True to the Dell model, Iizuka is trying to push sales through the Internet wherever possible--but that's proving a bit trickier in the TV business, where it's all about seeing what the machine can do. For that reason Byd:sign has also been trying to get its products into showrooms, both under its own name and as house labels for retailers, including Best Buy stores in the United States.

There are plenty of potential threats. Other so-called no-brand or white-box producers are trying to get their products to the market in similar ways. (One Chinese company sells its low-end products under the Westinghouse brand, bought up specifically for the purpose of reas-suring U.S. consumers.) In response, big brands are shaving prices--and Sony, Philips and Samsung gained back market share last year, says Hisakazu Torii, director of TV market research at DisplaySearch consultancy in Tokyo: "This will be the make-or-break year for a lot of the small companies."

Meanwhile, in Japan, brand-obsessed consumers are still reluctant to buy TVs by price rather than name. But Iizuka is banking that his knowledge of the tech business on both sides of the Pacific can keep him ahead of his competitors. And besides, his home country was never his first priority, he says. His sales strategy is: today the world, tomorrow Japan.